Hoteliers: OTA battle has reached tipping point
Hoteliers: OTA battle has reached tipping point
18 OCTOBER 2016 7:33 AM

Some hoteliers are convinced hotels are catching up with online travel agencies in the battle of distribution, but the gap is still significant, sources said.

MANCHESTER, England—As online travel agencies continue to dominate the distribution battle, hotels are starting to regain some ground in the fight, sources said.

Speaking at a panel titled “Tomorrow’s world” at the recent Annual Hotel Conference, Andrew Shaw, associate VP of development for InterContinental Hotels Group, said hotels have reached the distribution tipping point by improving the technology component that encouraged more direct bookings.

“We realize (hotels had) lost that ground, but now in the United Kingdom and Ireland our direct conversion is growing at a faster pace than that of OTAs, and that is good news for our owners,” Shaw said. “We are fighting the same war … and the OTAs want a piece of that, so they will look to disrupt it in other ways. They are not scared, but they might be nervous.”

Ed Lines, industry head at Google U.K., disagreed and said there are so many touch points along the booking journey that it is no longer linear.

“Our research shows that each booking takes two-and-a-half weeks and 18 websites over several sessions just to book a room … it might just be the case of somewhere along the line providing the clearest reason for why (guests) should book,” Lines said.

Lines added that OTAs have successfully capitalized on this lack of certainty.

“Only 16% (of those booking) know what brand they want before they search,” Lines said. “They start with a very generic search query. … What (do) hotels intend to do about it?”

Gaining ground
The hotel industry is doing better at providing improved product and distribution, said Cris Tarrant, CEO of research consultancy BDRC, “especially in social spaces, responding to changes in lifestyles and expectations.”

Tarrant said the sharing economy is the biggest threat to hotels.

James Bland, BDRC’s director of hotels and hospitality, said OTAs and sharing-economy providers have adapted their advertising efforts promoting experiences and “the dream phase” at the same time hotel companies have encouraged direct-booking perks.

“(Their spend) is still outgunning hotel spend,” Bland said. “Younger consumers are moving away from hotel brands and more towards (user-generated content). They say, ‘If it is online, it must be true.’”

Tarrant said evolving guest desires have complicated the situation even further.

“The same consumer can have different need requirements depending on the nature of every trip,” Tarrant said. “Hotels have had a very good run in terms of (revenue per available room), and that let the Airbnbs in to get some share. Brand loyalty is increasingly becoming a digital asset.”

Roxane Gergaud, co-founder of budget boutique hotel search engine Doris & Dicky, said hotels must develop richer content and stories to outperform the sharing economy.

“Experiences and human connections can still deliver against the Airbnbs of this world,” Gergaud said. “Guests are not after features. Often trips start on Instagram and Pinterest.”

Competing for millennials
Lines said success with millennial guests depends not just on distribution strategy but on more holistic changes for hotels.

“Much success online has to do with how much the hotels understand about their customers and their booking patterns,” Lines said.

While Shaw said it’s unlikely hotels will ever completely break free from the OTAs, Tarrant said hotel companies are still fighting back with consolidation.

He added more research was needed on the percentage of Airbnb users that said they would have preferred to stay in a hotel.

“We should focus on our (unique selling points), our product and service levels. … security, too,” Shaw said. “Focus on that, and Airbnb will evolve as it will evolve. If you lose millennials to the Airbnb model now, it will be so much harder to get them back later.”

Lines said he was amazed by how Airbnb sentiment has changed in the last year.

“There were 1.5 times more searches globally last year for Airbnb than there was for the Expedia brand,” Lines said. “Also telling is that 42% of Airbnb hosts say they are now business traveler-ready.”

Shaw said hotels still have the advantage in the loyalty game.

“Loyalty programs from OTAs is another counterargument to the fact hotels have pushed and pushed you will not get a cheaper rate than by coming direct,” Shaw said. “We have to repeat, repeat and repeat this mantra.”

Lines said going forward OTAs that were not price-accurate will be increasingly penalized.

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